On the 24th, we wrote: S&P forecast November 24th, 2008 - Sell The Relief Rally

So with 5 straight up days in the markets creating a buzz about a bull rally, how did we predict the crash on December 1st?

How Fibonacci Predicted Yesterdays Crash With Pinpoint Accuracy

In this new video, I will show you how a mathematician who has been dead for several hundred years, pinpointed today’s downturn in the market (12/1/08). I think that you’ll find this short video informative, educational and above all practical.

Watch today’s video.

With the 2008 trading year rapidly coming to an end, we think it’s diligent to look forward at what and how you’re going to approach the markets in 2009.

As I’ve said before in our blog, there is going to be some fabulous opportunities to make money in the New Year. However, it’s going to take discipline and a structured approach to take advantage of those opportunities.

Enjoy the video, and let us know if you found it helpful by emailing

The sheer velocity of the moves in the markets is astounding, marked by a near all time high reading on the VIX on November 2th of 80.86. Today’s close left the fix at 64.63, a good 20 points above historic "high" levels. This type of pattern in the vix is very characteristic of relief rally’s, and is no different this time. For those of you who trade options, writting call options should continue to be very lucrative over the comming weeks.

The current relief rally did bring the market back above the critical 800 level, which I believe must hold to keep the country out of a much longer term recession, with the possibility of depression. I would look for the markets to rally to a level between 891 and 928 before turning around and retesting the November lows of 741.

I am currently watching the PPO and ADX very closely. The PPO is showing some signs of forming a bottom, which I belive could put the market into a several month sideways pattern as the bulls and bears duke it out in a bloody battle for market dominance. The key level for the bulls is the October high of 1044.31. I believe it is reasonable that the market could test this level sometime between the end of March, and the end of June, 2009. In order for this to happen, the current 20 week cycle must begin to level out, and the indicators have to make some advances against the bull. Also, look for the vix to come back down to earth.

Click To Enlarge

$3.48 per share or 21% profit in 11 days, not too shabby! Here’s how the trade played out:

Check out the video: "How Low Can the Dow Go?"

First I took a  look at the trend for the DOW. Clearly the trend is down, but we want to figure out whether or not it is going to continue. There is a very bearish signal showing on the accumulation / distrubution where the line crosses below a 26 week moving average. This is the first time in over 5 years that any cross of this line has occurred. Second, the ADX is showing the down trend gaining strength. Any reading above 25 is considered a strong signal

Trend:

Price Target

So whats the price target. The chart is showing that we broke to the downside of a continuation triangle. The top of the triangle to the bottom is approximately 1300 pts. 1300 points below the the bottom of the triangle at 8000 puts us in around 6700 on the DOW. So the projection is 6600 - 6700.

Several months ago I discovered a major technical formation that spelled trouble for Apple. I have to admit that I was saddened by this. This formation was also picked up by our "Trade Triangle" technology. Our algorithm triggered a sell signal and has continued to suggest a short position for Apple all this time.

Watch my new video on Apple.

I was surprised that we’ve seen this market come down so easily. It seems like every time I visit an Apple store they are always busy and their products always seem to be selling well.

The question is, are we at the end of the iPod era?

Given the chart formation, the double top and pivot point, it seems we are headed lower. The Pivot Point measures down to the $40-$50 range and Apple at $90 still has a long way to go on the downside.

What caught my eye this weekend was a weekly continuation pattern to the downside and the fact that Apple closed at a new weekly low for the year. This is not a bullish sign by any stretch of the imagination.

For this coming week, I expect to see further downside pressure on Apple. I believe that we are going to be looking at the $50-60 dollar range as our target zone. Of course everything within will be tempered by our "Trade Triangle" technology. When our short-term "Trade Triangle" turns positive, we will close out short positions and take to the sidelines. In my opinion, it’s going to take some time for this market to improve and turn around. The technicals are just too weak at the moment.

Here’s the video, check it out

Technical Analysis

The first thing I noticed about the daily chart is that today formed a very large bearish engulfing candlestick pattern. Second is that there is huge divergence with the Accumulation / Distribution indicator. Third, there is significant divergence in the RSI. Fourth is that the Williams %r is flashing a new sell signal. Finally, price today broke a recent uptrend line at $17. When you combine a leading indicator such as accumulation / distribution showing divergence with a bearish candlestick pattern, this is a reliable sell / short signal. Finally, the 50 day moving average has acted as strong overhead resistance providing a clear stop with minimal risk.

Current Price - $16.65
Resistance 1 - $15.93
Resistance 2 - $15.27
Target - $13.17
Stop - $17.96 (Current 50 day ma)

1 week up, 1 week down. That has been the trend since the beginning of October. A look at the weekly chart for the S&P 500 is enough to make anyone’s head spin. Last weeks high hit the 38.2% retracement level from the mid-August high’s and immediately turned around.

Both the monthly and weekly charts continue to show signs that the downtrend is still well intact. They are both showing bearish moving average crosses, no divergence in any of the indicators, and strong but extended trend strength on the ADX.

Forecast for this week

The daily chart is showing a nice symetrical triangle, and price bounced off of the rising support line which also corresponds with the short term 61.8% retracement level. The market should trade to the upside in a tighter trading range this week as price makes its way up towards the downward resistance line of the triangle. Expect to see some resistance around 950, and again around 980. A break above 1000 on high volume could signal another strong counter trend rally.

Daily Chart - Click To Enlarge

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Weekly Chart - Click To Enlarge

Monthly Chart - Click To Enlarge

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As with all types of trading, having a well constructed, battle tested, and systematic trading plan is the best way to make consistent profits, under any and all market conditions.  Check out this video

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If you follow my regular updates on the s&p, you know that I expect the market to head a bit lower within the next 5 months before we get to head for higher ground. No bull or bear market moves straight up, or straight down, and counter trend relief rallies are a normal and healthy aspect of market action.

However, I believe relief rallies do have long term effects on the overall market cycle, and considering all of the horrendous news this market managed to digest and still post a positive gain last week leads me to believe this particularly rally is a sign that the bear is preparing to hibernate.  A word of caution though, the market, just like real bears will expend and exhaust every last bit of energy preparing for this event.

Overall the long term trend is still bearish, however this current rally is starting to have an effect on the indicators, and I believe it has been just strong enough to make the bears think twice about getting short. this is great news for volatility, and we should see "calmer" trading over the next week or so.

Weekly Chart:

As I said, the longer term weekly chart is still bearish, although showing some signs of weekness:

Daily Chart:

The shorter term daily chart is much more interesting While the weekly chart is showing signs of bottoming, the daily chart is showing outright divergence, and signs of trend reversal. RSI and PPO are showing divergence while the ADX is flashing a classic trend reversal pattern:

Industry Group Wrap Up

I put together about a 15 minutes video covering a wide range of industry groups, and chose the top 2 for those of you looking to go bullish:

Part 1:

Part 2:

The Big Day is Tomorrow:

Many of you properly use an RSS feed reader or something similar to keep up to date with your favorite blogs. What I’ve done with my first lens is to take that concept and focus it one topic: Updates from investment gurus. It automatically gathers the lastest tips and tricks from 4 prominent individual investors. Here is a short except from the lens:

I’m going to be creating a series of lenses that focus on finding the best investment advice available from independent investors. Meanwhile take a look at my first lens-  Investment Gurus: Profitable Tips From Prominant Individual Investors and let me know what you think